If you had your eye on a house or neighborhood in a certain price point but weren’t able to borrow enough for a loan, your luck may change in 2024. Last week the Federal Housing Finance Agency and Federal Housing Administration announced the increases to how much buyers can borrow for loans backed by the federal government, as part of their annual requirement to keep pace with the change in house prices.
For FHFA loans the limit will increase to $766,550, a $40,350 jump over the 2023 threshold of $726,200. In areas with a higher cost of living, such as California, New York and Hawaii, the limit is set to be 150% of the baseline limit which equals $1,149,825.
Ken Fears, Director of Conventional Housing Finance and Valuation Policy, at the National Association of REALTORS, said “NAR is encouraged by the FHFA’s continuing efforts to provide liquidity in all markets. Homebuyers in high-cost markets are not immune to the affordability challenges presented by the surge in mortgage rates over the last year. Allowing Fannie Mae and Freddie Mac to support the broader market provides much needed and affordable financing for those who do not qualify for purely private options.”
For FHA loans, which often appeal to buyers with smaller downpayments or lower credit scores, the limit will rise to $498,257 up from this year’s limit of $472,030. FHA loans often require only a 3% minimum downpayment, but come with required private mortgage insurance as part of the loan.
“The higher conforming loan limits will help more people, especially those who live in high-cost areas to be able to purchase a new home. especially now when rates are still so high, but dropping. Conforming loans allow for lower credit scores, debt-to-income ratios up to 50%, smaller down payments, renovation loans and more,” said Melissa Cohn, Regional Vice President at William Raveis Mortgage.
Home prices have climbed steadily, with this fall’s median house prices up between 3.4% and 3.5% compared to last year, according to both NAR and Redfin data. The increase in mortgage interest rates has softened price growth, but demand continues to remain high which means any potential decreases in median prices in the coming year will likely be minimal and confined to less competitive markets.
To see a full map of where the different loan limits apply, head to this site by the FHFA.